How to Verify a Crypto Exchange's Proof of Reserves in 2026
US prosecutors said FTX customers lost over $8 billion to fraud. Learn how to verify exchange proof of reserves, read reserve ratios and understand what those reports cannot guarantee.
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US prosecutors said FTX founder Sam Bankman-Fried stole more than $8 billion in customer funds. The exchange collapsed in November 2022. Its failure made customer-asset transparency a central question for cryptocurrency platforms.
A more recent example shows what exchanges now publish. Kraken reported a 102.9% Bitcoin reserve ratio and a 100.5% Ether reserve ratio in its 30 June 2026 snapshot. These figures cover specified customer balances at that date. They are not a guarantee against future losses.
Proof of reserves can help customers check whether an exchange holds certain assets. But a reserve figure does not reveal every debt, legal claim or business risk. This guide explains what the reports show and how to question them.
What is crypto exchange proof of reserves?
Proof of reserves, or PoR, is a way to show that a crypto platform controls assets linked to customer balances. Some providers use blockchain wallet evidence. Others also use independent accountants and cryptographic checks of customer liabilities.
A complete assessment needs two sides. Reserves are the assets held by the platform. Customer liabilities are the balances it owes customers within the report's scope.
If a platform claims to hold 10,000 BTC for customers, the number alone says little. It also needs to disclose or verify the relevant BTC obligations. The comparison is what gives a reserve ratio meaning.
How is a reserve ratio calculated?
For one asset, the basic calculation is:
Reserve ratio = verified in-scope assets ÷ verified in-scope customer liabilities × 100
A ratio of 100% means the assets and customer liabilities match at the measurement date. A ratio above 100% means the reported assets exceed the reported obligations. A lower ratio signals a shortfall within the scope of that calculation.
Example: Kraken's June 2026 snapshot
Kraken's published report lists the following asset-specific ratios for 30 June 2026:
| Asset | Published reserve ratio | What it means for that snapshot |
|---|---|---|
| Bitcoin (BTC) | 102.9% | Reported BTC assets exceeded in-scope BTC balances by 2.9% |
| Ether (ETH) | 100.5% | Reported ETH assets exceeded in-scope ETH balances by 0.5% |
| Solana (SOL) | 100.6% | Reported SOL assets exceeded in-scope SOL balances by 0.6% |
| XRP | 102.3% | Reported XRP assets exceeded in-scope XRP balances by 2.3% |
| USDC | More than 105% | Reported assets were at least 5% above the stated liabilities |
These are Kraken's dated published figures. They do not describe all exchanges. They should not be read as a real-time solvency test or a prediction of future withdrawals.
The snapshot also has a defined asset scope. An exchange can publish ratios for BTC and ETH while leaving other assets outside the review. Always read which products and balances are included.
Why showing a wallet balance is not enough
A blockchain explorer can show tokens at an address. It cannot always identify the legal owner of those tokens. Nor does it reveal every debt or restriction affecting the company.
Consider an exchange that displays 5,000 BTC in a wallet. That number is not useful without knowing the customer BTC balances. The exchange could owe 4,000 BTC or 8,000 BTC.
Wallet screenshots can also be misleading. They may show old holdings or addresses that the platform cannot move. A stronger report should verify control of assets and compare them with customer obligations.
What is a Merkle tree?
A Merkle tree is a cryptographic method for combining account records into a single digital fingerprint. Each account record can be checked against the tree. The process need not publish customers' names or individual balances.
An exchange can give a customer a record identifier or cryptographic proof. The customer uses it to confirm that their balance was included in a specific snapshot. That matters because a report could otherwise omit liabilities.
Kraken explains its Merkle-tree process and offers customer-level verification. Binance also describes Merkle trees and zk-SNARK proofs. Their methods differ, so follow each platform's own published instructions.
How to verify your balance in a proof-of-reserves report
Start with the exchange's official website. Find its latest proof-of-reserves report. Check the publication date and the date of the underlying snapshot.
Next, look for the list of covered assets. Confirm that the cryptocurrency you hold is included. A BTC report cannot prove that another token is fully backed.
If customer verification is offered, follow the platform's instructions. The tool may show a Merkle proof or a customer record identifier. Check that the record corresponds to the correct balance and snapshot.
Do not paste passwords, private keys or recovery phrases into a third-party verification site. Use the exchange's verified portal. Keep a copy of the report and the result for future reference.
Seven questions to ask before trusting a reserve report
A report is more useful when the exchange explains its scope. Ask these questions before treating a figure as evidence of financial strength.
- 1When was the snapshot taken? A published report may describe balances from weeks or months earlier.
- 2Which assets are covered? Confirm that your token and product type appear in the report.
- 3Who checked the figures? Look for the independent practitioner's name and the actual work performed.
- 4Are customer liabilities included? An asset list without obligations cannot establish coverage.
- 5Can customers verify inclusion? A Merkle proof may help check whether their account was counted.
- 6Are assets restricted or borrowed? Encumbered assets may not be freely available for withdrawals.
- 7Does the report cover company-wide debts? Trading loans and other corporate obligations can sit outside a customer-asset review.
A provider may answer some questions but not others. That does not automatically prove fraud. It does mean the published evidence has limits.
Proof of reserves is not proof of solvency
A proof-of-reserves exercise may show certain wallets and liabilities on one date. Solvency is a broader question. It depends on all relevant assets, debts and obligations.
An exchange may owe money to lenders or trading counterparties. A snapshot of selected customer assets might not include those liabilities. It could also miss off-chain obligations or other operating losses.
The US Public Company Accounting Oversight Board warned about proof-of-reserves reports. Such reports do not automatically provide the assurance of a financial-statement audit. Their procedures and scope must be examined carefully.
Why a ratio above 100% is not a guarantee
A ratio of 102% may be reassuring within its stated scope. But it does not establish what will happen tomorrow. Asset ownership, pricing, liabilities and operational controls may change.
A report may also exclude products such as loans or some staking arrangements. Check whether it covers trading balances, margin collateral and custodial wallets. Never assume every customer product is included.
What FTX taught exchange customers
FTX's collapse made it clear that a popular trading platform can fail suddenly. US prosecutors said customer money was misused on a massive scale. The criminal case involved more than $8 billion in stolen funds.
A reserve disclosure alone would not replace strong custody controls. Customers also need clear ownership terms and reliable withdrawals. Company governance and independent financial oversight matter.
Our FTX collapse report explains the events and bankruptcy proceedings. Our guide to what happens when a crypto exchange shuts down covers claims and possible recoveries.
Can proof of reserves reveal a future exchange collapse?
Not reliably. A reserve snapshot can flag a shortfall within the reported scope. It cannot predict a hack, management misconduct or a sudden funding crisis.
An exchange may show strong reserves but still experience operational problems. Withdrawal systems can fail. Banking partners and other counterparties can also create risks.
Treat proof of reserves as one part of due diligence. Read the legal terms and assess custody. Check whether the company provides clear withdrawal policies and independent reporting.
Proof of reserves versus a financial audit
The two processes answer different questions. Proof of reserves often focuses on selected crypto holdings and corresponding balances. A financial audit can examine a much wider set of financial statements and controls.
Neither process removes every risk. The key is to read what was actually examined. Look for the auditor's or practitioner's report, not just an exchange's summary graphic.
| Question | Proof of reserves | Financial-statement audit |
|---|---|---|
| Does it examine identified crypto balances? | Often | Depends on audit scope |
| Does it compare customer obligations? | Sometimes | Depends on financial reporting and audit scope |
| Does it assess all company debts? | Not necessarily | Audited statements can cover a broader set of liabilities |
| Is it a guarantee against failure? | No | No |
| Can a customer verify their own inclusion? | Some schemes allow this | Not usually the purpose |
An attestation is not automatically a financial-statement audit. Nor does an attractive verification dashboard prove the company is solvent. Always read the scope and limitations.
How to protect your cryptocurrency beyond reserve reports
Check the exchange's custody model. Find out who controls the private keys and whether customer assets are pooled. Read the rules for withdrawals and account freezes.
Use strong account security. Enable authenticator-based two-factor authentication where supported. Watch for phishing messages that impersonate exchange staff.
Do not keep more money on a trading platform than you need for your intended activity. Consider the trade-offs of self-custody. A private wallet reduces exchange dependence but adds key-management risk.
Kenyan readers can also learn how to check whether a crypto exchange is licensed. A licence and a reserve report answer different questions. Neither should be presented as a guarantee of customer funds.
The bottom line
Proof of reserves can help verify selected assets and customer balances. It becomes more useful when liabilities and customer-level checks are included. But it remains evidence from a defined time and scope.
Ask what the report covers and who verified it. Look beyond the headline percentage. Solvency, security and access to withdrawals require wider scrutiny.
Sources and methodology
Reviewed 27 October 2026. All reserve ratios are attributed to a dated exchange snapshot. They are not current guarantees or independent assessments by Finlazo.
- US Department of Justice — Sam Bankman-Fried sentencing: more than $8 billion in misappropriated customer funds.
- Kraken — Proof of Reserves: 30 June 2026 asset ratios and customer verification approach.
- PCAOB — Exercise Caution With Crypto Asset Proof of Reserve Reports: limits of reserve reports.
- Binance — Proof of Reserves: examples of Merkle-tree and cryptographic customer verification.
This article provides general information. It does not certify any exchange's solvency, regulatory standing or financial security.
